MCI WorldCom installs networks in Japan

Aug. 1, 1999

MCI WorldCom Japan is installing fiber networks in the central business districts of Tokyo and Osaka. Both builds are scheduled for completion in a year. The installations highlight not only contentious rights-of-way within Japan's national infrastructure, but also the different approaches for network expansions taken by domestic and foreign telecommunciations carriers.

Among the various ways to enter Japan's telecom market, MCI WorldCom Japan chose construction. So far, the carrier is the only foreign-capitalized company building its own fiber network in Japan. Other companies such as BT and AT&T are struggling to involve themselves in the Japanese market through investments or alliances.

As in most areas of the world, the cost of excavating and installing a network in Tokyo is expensive and slow. Even with a power shovel, MCI WorldCom Japan's construction company manages only about 20 m per night in Tokyo's central Chiyoda ward. The reason is not only the hard volcanic sediments, but also that construction work in Japan is permitted only at night and the site must be covered in the morning. The payoff is that the company will own about 80% of its facilities in Tokyo, enabling the carrier to avoid any dependency on the prime nationwide carrier, Nippon Telegraph and Telephone (NTT--Tokyo), which could save expenses in the long-term.

MCI WorldCom Japan is also open to other alternatives such as use of NTT's ducts and local government sewerage systems; 20% of the network's fiber is now leased. But current rental rules make it difficult for both domestic and foreign firms to rent facilities from nationwide carriers like NTT. For example, under current regulations, NTT can rent out its facilities in the area between an NTT switch and the nearest manhole. Yet, NTT will rent these facilities only if it has "no plan to use them." A study of this availability used to take about three months (it now takes two months).

Because of inconsistencies with current self-disclosure practices, the U.S. government asked the Japanese government to clarify the rules for renting out those facilities and set up a system to resolve complaints. The Japanese government set up a study group consisting of related ministries and agencies such as the Ministry of Foreign Affairs, Ministry of International Trade and Industry, Ministry of Posts and Telecommunications (MPT), and the Ministry of Transport. The group released a position paper on the issue at the end of December 1998. Both MPT and NTT are opposed to changing current practices, and the Ministry of Foreign Affairs stated that there is no need for government regulations to increase access to right-of-ways. In sum, MPT said the issue should be dealt with by the private sector.

Following the position paper, however, Type 1 carriers such as NTT and electric utility companies, including Tokyo Electric Power Co. (TEPCO), released their rates, terms, and conditions for the use of such facilities as ducts, conduits, and manholes. They were joined in late March this year by other carriers such as Kokusai Denshin Denwa Corp. (which has 1000 km of fiber in its network), Japan Telecom Co. Ltd. (another 1000 km), DDI Corp., and railroad operators. NTT will rent its telephone poles for 1600 yen per year, while rent for manholes and ducts will be "calculated" based on construction costs.

Another possibility for telecom carriers is the Tokyo Metropolitan Government's sewage system. In 1997, the government started to rent access to part of its 15,000-km sewage system and the 400-km fiber network built within it. The annual rental fee for the duct is about 1200 yen per meter. About 6 km are now rented to carriers. So far, rentals have been few because carrier demands and the location of facilities do not match.

While other foreign carriers are observing MCI WorldCom Japan's efforts to enter the market through construction, none have shown any inclination to follow its example. Global One, a joint venture of France Telecom, Deutsche Telecom AG, and Sprint, won a Type 1 license in Japan and are soon to launch an international leased circuit service.

Teleglobe, a Canadian telecom firm, also won a Type 1 license and is focusing on the wholesale business, leasing networks from domestic carriers.

Meanwhile, when MCI WorldCom Japan finishes the first phase of its network in the Tokyo wards of Minato, Shinagawa, and Shinjuku as well as Osaka in mid-2000, the carrier expects to have more than 10,000 customers, who will then be linked to the company's global network. The company also is now laying fiber in Sydney's CBD, and the Southern Cross Cable Network is coming into service this year, connecting the United States, Australia, and New Zealand. The Japan-U.S. cable will come online next year; discussions are now underway about connecting Japan to Australia to complete the triangle in two or three years.

Paul Mortensen writes on the Asia-Pacific region from Australia.